Quality Management Metrics

 Sustaining Edge Solutions, Inc. Newsletter

Performance Improvement Solutions for Your Business                              September 2012


This Month
* Quality Management Metrics
* Information Technology-Service Management
* ISO Standards – What’s the Bottom Line?
* In the News
* Training Courses


Dates have changed to February 6-9, 2013 Denver, Colorado.  We are a sponsor of this conference!                     

Baldrige Regional Conference

September 28, 2012 Scottsdale, Arizona.  See you there!  
ASQ Audit Division Conference October 11-12, 2012.  Augusta, Georgia. 


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Our newsletters provide information on business management systems.  These systems include ISO 9001 QMS, AS9100 Aviation, Space and Defense, ISO/TS 16949 Automotive, ISO 27001 Information Security, ISO 13485 Medical Devices, ISO 14001 Environmental, and others.  Subjects include performance improvement methods such as Six Sigma, Lean Enterprise, and other topics of interest to our readers.

If you have any questions regarding the content or have a subject of interest for a future newsletter, please let us know. 


Quality Management Metrics     


If you’re a first-line supervisor responsible for managing operations, you know how important operational metrics are to the life and longevity of your organization.     


If you’re a corporate executive, you are often inundated with data, which makes it difficult to pull out relevant insights. Although most metrics on the executive dashboard are finance-related, executives in manufacturing organizations need visibility into operational metrics to gain more control over their businesses. They are looking to understand the effect operational performance has on their organizations’ goals.


The impact quality has on a company’s success is often well understood. However, companies have traditionally struggled to establish metrics that can easily represent the effectiveness of quality in the organization.


Cost of Quality.  The definition of this metric is similar to the way it sounds. It measures the cost incurred by an organization to manufacture a quality product. Further narrowing things down, these costs come from two main categories: cost of good quality and cost of poor quality.  There are many different definitions of the Cost of Quality available, and many are lacking in scope or precision. To remedy this, we thought building on one of our favorite basic definitions (provided by ASQ, an organization we respect and are senior members) would be a good starting point.


At the highest level, there are two different terms in the Cost of Quality equation: the Cost of Good Quality (CoGQ) and the Cost of Poor Quality (CoPQ). This can be understood in the below formula:


CoQ = CoGQ + CoPQ


Let’s start with the Cost of Poor Quality. These are the traditional quality costs companies measure. Examples would include scrap, rework, and returned materials. To give this part of the equation more structure, we think of Poor Quality costs as having two different terms: Internal Failure Costs (IFC) and External Failure Costs (EFC). This can be understood by the following equation:


CoPQ = IFC + EXC, where:


IFC = Scrap Costs + Rework Costs.


When it comes to the Cost of Good Quality, these are the costs that are much less likely to be measured by a company. Generally, these are the costs companies incur to ensure they are producing quality products. Again we break the Cost of Good Quality calculation into two different terms: Appraisal Costs (AC) and Prevention Costs (PC).


Appraisal Costs are the costs associated with measuring, evaluating or auditing products or services to assure conformance to quality standards and performance requirements. Activities that fall into this category include: Inspections, Testing, and Calibration. To measure these costs it is helpful to break them down into 3 broad categories, for example: percentage of Employee Costs, percentage of Software Costs, and percentage of Equipment Costs devoted to these activities.


Prevention Costs are the costs associated with all activities specifically designed to prevent poor quality in products or services. Activities that fall into this category include: Quality Planning, Risk Management, Continuous Improvement Team Activities, Corrective and Preventive Actions, Audit Management, and more. Again, to measure these costs it is helpful to break them down into 3 broad categories: percentage of Employee Costs, percentage of Software Costs, and percentage of Equipment Costs devoted to these activities.  


This can be understood by the following equation:


CoGQ = AC + PC, where:


AC = % of labor, software, and equipment costs focused on appraisal activities.


PC = % of labor, software, and equipment costs focused on prevention activities.


EFC =  Returned Product Costs + Warranty Costs + Product Recall Costs. 


Cost of Quality Formula is not Linear

Although it goes beyond just the Cost of Quality model, it is worth noting that the Cost of Quality equation is not linear. This means that increasing the Cost of Good Quality by $1 does not mean the Cost of Quality also increases by $1. In fact, sometimes the opposite is true.

For example, investing $1 in a new piece of calibration equipment or software is an addition of $1 to the CoGQ but it could also result in a lower scrap rate which could lower the COPQ by more or less than $1.


It is for this reason that it is important to continually measure the CoPQ, CoGQ, and CoQ so that investments in the CoGQ can be justified by subsequent reductions in CoPQ and the overall CoQ. 


For more information on Cost of Quality and how we can help reduce your operating costs and increase revenue, Contact Us


Information Technology – Service Management  


The ISO20000-2:2005 Code of Practice has been replaced by ISO 20000-2:2012, Information Technology – Service Management – Part 2: Guidance on the Application of Service Management Systems.


ISO 20000-2:2012 provides guidance on the application of service management systems based on the requirements in ISO 20000-1:2011. It enables organizations and individuals to interpret ISO 20000-1 more accurately and, therefore, to use it more effectively. The guidance includes examples and suggestions to enable organizations to interpret and apply ISO 20000-1.  


This includes guidance on the use of an SMS for the planning, design, transition, delivery and improvement of the SMS and services. At a minimum this includes service management policies, objectives, plans, service management processes, process interfaces, documentation and resources. The SMS provides ongoing control, greater effectiveness, efficiency and opportunities for continual improvement of service management and of services. It enables an organization to work effectively with a shared vision.


An SMS provides ongoing control, greater effectiveness, efficiency, and opportunities for continual improvement of service management and of services. It enables an organization to work effectively with a shared vision.  


Some of these changes are:

  • Clauses 3 to 10 have been restructured into clauses 4 to 9
  • Number of defined terms has grown from 15 to 37 definitions
  • Objective statements have been removed after each clause
  • Resources referenced as human, technical, financial, and information
  • Adds a catalog of services as a required document
  • Includes more clearly stated requirements for less interpretation.

You can order an electronic copy of the 26 page ISO 20000-1:2011 standard and the 85 page ISO 20000-2:2012 standard at the ANSI web site.


ISO Standards – What’s the Bottom Line?         


ISO (International Organization for Standardization) is the developer and publisher of more than 19,200 voluntary International Standards bringing benefits for business, government and society. But how do ISO standards contribute to the economic returns of countries and companies? What is the “bottom line”?


A new brochure provides answers by giving examples in hard figures of the benefits of implementing ISO’s and other voluntary, consensus-based standards: 

  1. For the global economy and a number of national economies
  2. For individual companies from different sectors and countries.

An inventory of studies established by ISO and the International Electrotechnical Commission ((IEC) on the economic and social benefits of standards, from which many of the following examples are taken, can be accessed at:


Estimates by the Organization for Economic Co-operation and Development (OECD) and the US Department of Commerce both show that standards and related conformity assessment (checking that products and services measure up to standards) have an impact on 80 % of the world’s trade in commodities.

The World Trade Organization (WTO) requires its members to use international standards of the type developed by ISO, in order to avoid the technical barriers to trade that can be caused by differing national or regional standards.

The brochure can be downloaded as a PDF file free of charge from the ISO Website.  This brochure also provides further links to case studies and how world-wide companies have saved dollars and enhanced customer satisfaction through ISO standards.   


In the News    

Are you a tech-aholic? 

As reported in Newsweek: 


“Every time your phone, tablet or computer pings with a new text, tweet or email, it triggers a sense of expectation, and the reward centers in your brain receive a pleasurable ‘squirt of dopamine.’


In other words, we’re addicted.  And maybe that explains why we’re so helpless when it comes to disconnecting, and why the workweek is trending closer to six days than five.    


Based on a survey  and study conducted by Good Technology of 1,000 workers across the United States, it was discovered that most stay connected because they feel they don’t have a choice: Their employers and clients expect it.  Of course, now we know they really can’t help it because they are addicted.    


Let’s check ourselves.  Here are a few highlights from the survey.  Where do you fit in?   

  • 88% of people check their work emails before 8:00 a.m. (Us? Guilty.  Our average check-in is 6:00 a.m.)
  • The average Americans first check their email while still in bed. (No.  Never have and Never will.) 
  • The average Americans first check their phone around 7:09 a.m. (Us? 6:35 after the first email check.)
  • The workday is growing – 40 % still do work email after 10 p.m. (Occasionally.) 
  • 69% will not go to sleep without checking their work email. (True.  We check every night, but only occasionally do we respond.)
  • 57% check work emails on family outings. (Yes, sorry to admit.  Have phone, will travel.)
  • 38% routinely check work emails while at the dinner table. (Yes, guilty as charged.)


 How did you fare? Don’t be dismayed.  We’re all in this together!


Personal Certification Program   

Personnel certification has become an important element of verifying the competence of an increasingly mobile and global workforce, underscoring the value of industry-recognized credentials that can be carried across national borders. In response to this growing need, a new and improved ISO/IEC international standard aims to harmonize the various procedures used around the world for certifying the competence of personnel in different occupations or professions.  

The breadth and scope of certification programs in existence today are tremendous: Programs exist for financial planners, public accountants, safety professionals, nondestructive testing experts, supply and purchasing management professionals, the construction industry, health care professionals, and hundreds more.


The updated ISO/IEC 17024 standard, which was first published in 2003, will help organizations that certify individuals in a variety of occupations and professions protect the integrity and ensure the validity of individual certification programs. It will also promote consumer and public confidence in the capabilities and competence of the people who provide specialized services or who create the products that support our daily lives and livelihoods.


To purchase ISO/IEC 17024 standard, see the complete list with contact details.


CD Focuses On Environmental Standards


A new CD released by ISO titled “ISO Standards and the Green Economy,” packages together the entire ISO 14001 family of environmental management  standards, plus a collection of publications related to sustainability.


Developed by ISO Technical Committee 207 on environmental management, the collection includes 30 international standards or related documents, and a technical corrigendum.  For more information, visit the ISO Store.      


Training Courses

To see the course description, schedule, and on-line registration click on the course title below. We deliver onsite training for these courses and customized training to fit your specific needs.  We offer group discounts.  


View all our Courses

View Our Web Based E-Training Courses   

ISO 9001 Quality Management

Understanding and Implementing ISO9001:2008

ISO 9001:2008 Process Based Internal Auditor 

Documenting Your Management System

AS9100 Aviation, Space and Defense

Understanding and Implementing AS9100C (9110 &9120) Aviation, Space and Defense

AS9100C:2009 Process Based Internal Auditor

Documenting Your Management System 

ISO/TS 16949 Automotive

Understanding and Implementing ISO/TS16949:2009 Automotive

ISO/TS16949:2009 Process Based Internal Auditor
Documenting Your Management System 

ISO 14001 Environmental

Understanding and Implementing ISO14001:2004 Environmental
ISO14001:2004 Process Based Internal Auditor

Lean Enterprise and CI 

5S Five Pillars of a Lean Workplace Organization
Continuous Process Improvement
Lean Six Sigma
8 Disciplines (8D) of Problem Solving

ISO 13485 Medical Devices

Understanding and Implementing ISO 13485:2003 Medical Devices
ISO 13485 Process Based Internal Auditor 

ISO 27001 Information Security

Understanding and Implementing ISO 27001:2005 Information Security
ISO 27001 Process Based Internal Auditor 

All courses can be delivered at your company. Don’t see a course, location, or date that fits your needs?

Contact Us




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